In Aristotle’s view, “true wealth” was finite, restricted to those articles “useful to the association of the polis or the household,” and thus necessary to sustain “the good life.” The exchange of commodities for money with the aim of making a profit was an artificial, and potentially destructive, enterprise. Trade, Aristotle declared, should be mutually beneficial, affording both parties with what they needed and otherwise lacked. Selling at a profit, on the contrary, always served one participant at the expense of the other. What can a philosopher born nearly 2,400 years ago, and a Greek philosopher at that, explain about mortgage bond derivatives, sub-prime borrowing, securities lending, credit-default swaps, international bailouts, and the consequences of tumbling off the fiscal cliff, all of which have combined as the “perfect storm” to engender a worldwide economic crisis? The answer is obvious. What can this same philosopher reveal about the disorientation of current economic thought and practice? The answer is not so obvious, and we would do well to consider what he has to say before we plunge into the abyss.
Aristotle (384-322 B.C.) described the proper object of economic activity as the careful management of resources rather than the unrestrained acquisition of wealth. Money for Aristotle was a convenience with no inherent worth of its own. Since some commodities were difficult to transport and others perishable, men had invented money to facilitate transactions. More easily portable and of a fixed, or at least an agreed upon, value, money itself was barren, sterile, and unproductive. In time, Aristotle conceded, men had begun to buy and sell not primarily to satisfy “the natural requirements of sufficiency,” but to generate maximum profit. That change transformed the nature and purpose of commerce from acquiring and husbanding scarce but essential items to accumulating a vast, indeed an unlimited, fund of currency.
More reprehensible was lending money at interest. Aristotle condemned the deposit banks, which had emerged in fourth-century Athens to offer commercial loans, and, like his teacher, Plato, regarded moneylenders in general with suspicion and disdain. “The trade of the petty usurer is hated most,” he noted in The Politics, “and with the most reason: it makes a profit from currency itself, instead of making it from the process which currency was meant to serve.” The extension of credit, designed to stimulate economic growth and development, just as often upset economic operations and imperiled community welfare. Greek farmers, for instance, who were heavily mortgaged, sold or lost their lands to pay their debts, reducing themselves from productivity to idleness, from affluence to penury, from independence to bondage.
Those who pursued wealth for its own sake, Aristotle resolved, were confounded about the purpose of life. Having yielded to their boundless desires, they had, at the same time, enslaved themselves to the unremitting quest to gratify them. Prudent men knew better. Exercising self-restraint, they accumulated wealth sufficient only to preserve an abundant and virtuous life. The effective management of property, it turned out, required above all a discipline of the soul. Without it, men unfailingly surrendered to greed and rapacity, as has now been evident for more than 2,000 years.
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